If rival oligopolists completely ignore Mitchell's Tool Company's price changes,then Mitchell's Tool Company's
A)Demand curve will not have a kink.
B)Most profitable strategy will be to raise its price.
C)Demand curve will be less elastic than if rivals matched price changes.
D)Demand and marginal revenue curves will be the same.

Question

Quizplus · Accepted Answer

The kink in the demand curve occurs when rival oligopolists match price changes made by Mitchell's Tool Company. If they completely ignore these price changes, the demand curve will not have a kink and will be relatively elastic. As a result, Mitchell's Tool Company may be able to increase its price without losing a significant amount of customers, making it more profitable to do so. The demand and marginal revenue curves may not necessarily be the same in this case.

If Rival Oligopolists Completely Ignore Mitchell's Tool Company's Price Changes,then